Deutsche Bank shares soar on fresh reports

Shares in troubled German lender Deutsche Bank soared by 6.39 percent in the final minutes of trading on Friday, rebounding from a plunge to historic lows earlier in the day. It helped Germany's blue-chip DAX index end the trading week in positive territory.

The turnaround came after AFP news agency reported that Germany's biggest bank was near an agreement with US officials to pay $5.4 billion (4.8 billion euros) over its sale of toxic mortgage bonds ahead of the global financial crisis.

US Justice Department officials had earlier pressed Deutsche Bank to pay $14 billion to settle the case, an amount the lender said was unacceptable and which had raised concerns over its solvency.

Deutsche Bank's stock had plummeted by more than 9 percent in early trading at the Frankfurt Stock Exchange Friday, falling below the psychologically important threshold of 10 euros a share for the first time in the lender's history.

Deutsche's freefall came in the wake of reports that a number of hedge funds had pulled money out of the German lender amid worries over its financial strength.

Bloomberg News reported Thursday that about 10 hedge funds that clear trades with Deutsche Bank had withdrawn some excess cash and derivatives holdings and moved the assets to other firms this week. But Bloomberg also said that the "vast majority" of the bank's clients have made no changes to their exposure at the bank.

Citing sources with knowledge of the situation, the news agency AFP confirmed the report, saying 10 hedge funds had pulled funds out, including Millennium Partners, Capula Investment, and British fund Rokos Capital Management.

Overly negative view

In response to the reports, Deutsche Bank said that Bloomberg gave an "overly negative view" of the situation and stressed that it still had some 800 funds with customers who understand its "stable financial position."

"Our trading clients are amongst the world's most sophisticated investors," said a Deutsche Bank spokeswoman. "We are confident that the vast majority of them have a full understanding of our stable financial position, the current macroeconomic environment, the litigation process in the US and the progress we are making with our strategy."

The German banking giant had been struggling to shore up its stock price ever since it became known that the US Department of Justice was seeking a penalty of $14 billion for Deutsche's role in the US subprime mortgage crisis that had caused the 2008 financial crisis.

Earlier this week, there was also speculation that the bank had held secret talks with the German government to seek state aid, which, however, was vehemently rejected by both.

In July, the bank only scraped through European stress tests and has warned it may need deeper cost cuts to turn itself around. Investors in Deutsche Bank have lost more than 90 percent of their money since Deutsche's share price peaked at over 100 euros about two years ago.

uhe/hg (Reuters, AFP, dpa)